As a founding principal of Avison Young, Robin White has seen Toronto’s real estate market through times of economic prosperity and uncertainty alike.
He has brokered over $10bn of property deals over the course of his career, including high-profile office buildings in Toronto and industrial assets throughout Ontario.
As he approaches 35 years at Avison Young, White spoke with Green Street News about investor sentiment, office market performance and the legacy he hopes to leave at the firm.
What are the main factors driving capital markets right now that you expect will persist for the next year or two?
I personally think the availability and the cost of capital are still key. Throughout my career, in uncertain times like this capital starts to become more challenging to acquire. As a result, investors shy away from investing if they can’t get appropriate capital, either equity or debt capital, to move forward with an investment property. In my view, that’s going to continue to be a challenge until the end of 2025.
Investors really want to see momentum. They want to see more positive economic news that will translate into strengthening demand, lower vacancies, and thereby growth and higher values. There has been a reduction in the Bank of Canada rate, but let’s face it, 25 basis points isn’t going to move the needle much. Until they really see solid evidence of that taking place, they’re going to be reluctant to invest to any great extent.
So where are investors focusing their attention right now?
Institutional investors, frankly, are not active in the acquisition of Canadian real estate right now. A number of those investors, pension funds in particular, their allocation to real estate is higher than they would like. They would like to reduce their exposure for diversification purposes, so that’s why you’re seeing some of them place property on the marketplace.
Where pension funds are starting to look more is the debt market. I think you’ll see a lot of them take a harder look at increasing their allocation to real estate debt over the next 12 to 24 months.
With respect to private investors, I would say the top asset classes they’re interested in are still the industrial and logistics markets. We are seeing quite a number of transactions taking place in the food-anchored, necessity-based retail side of the business.
“We’ve been successful in selling a few office buildings in the Greater Toronto Area, mainly to offshore investors”
The office market has generally been pretty quiet, and investors are shying away somewhat. But I have to say, we’ve been successful in selling a few office buildings in the Greater Toronto Area, mainly to offshore investors. In Vancouver, a German investor acquired a couple of office buildings from Oxford.
So, there are some exceptions to the rule for sure, and the Vancouver deal underlines the enthusiasm that some investors have for the longer-term appreciation of office space. But by and large, that asset class has seen quite a reduction in the number of investors that are willing to participate.
Is that reduction as dire as recent headlines have made it seem? Is the office market really “dead”?
I think it’s really important to understand that not all offices are the same. Those Vancouver buildings, for example, they were well leased, institutionally managed and in excellent condition. Those are the sort of buildings that tenants today are seeking.
Looking at Toronto, you’ve got a number of brand-new buildings that are coming to fruition. Most of them are either fully leased or extremely well leased before they’ve even been completed. These are the things that you don’t really see in the headlines. But it’s a fact that rental rates for those buildings are still very competitive. Landlords are getting a good return on those investments.
“Where the challenge is is in those office buildings which are either poorly located or they’re poor-quality B and C class assets”
Where the challenge is is in those office buildings which are either poorly located or they’re poor-quality B and C class assets. They don’t really meet the needs of today’s tenants who are looking for the LEED standards, the ESG, the good facilities and the amenities that these new buildings provide. These B and C buildings are not capable of doing that. As a result, they could definitely see a decline in value as tenants vacate in favor of the more modern alternatives.
The sector has seen a lot of change. What predictions do you have for the office market over the next two years?
I’m actually quite positive about those triple-A buildings. The economy is going to start growing again, and people are going to go back to the office. Those are two big assumptions, but I’ve got to believe that people will go back to the office and that major tenants will understand the benefits of having their staff congregate. And they will prepare for that.
Those offices that provide the amenities and have the quality, the LEED certifications and the ESG, I think those buildings have got a pretty good future long-term. I think in the medium term, they’re going to sort of tick along, and rents will stay around where they are right now.
For the other office spaces, I think they’re going to have a challenge for quite a number of years. They’re going to have to come up with some ideas as to how to repurpose them or to reinvest in those buildings to meet the needs of tenants. And in some cases, these B and C buildings might not be suitable for the sort of money that will be required to bring them up to that level.
You’ve been with Avison Young since its inception in Canada. What do you see as your greatest accomplishment with the firm?
When Avison and Associates started out 35 years ago, we had a vision, like any startup company. Our vision was to be a privately held, global, full-service commercial real estate company, based in Canada, and owned by the partners of the firm. Fast forward 35 years, what are we?
“There’s no question that we’ve attracted the best of the best in terms of partners and staff”
By and large, what I’m proud of is that we took that vision and we executed on it. We wouldn’t have been able to do that unless we had the excellent people that have come on board. There’s no question that we’ve attracted the best of the best in terms of partners and staff. Many of them have been with us from those early days, and that is a testament to the culture of the organization. It’s a unique experience compared to many of our competitors, who are publicly traded.
What is the legacy you hope to leave at Avison Young?
The legacy I’d like to feel I’ve left is to have created a certain culture within the organization. Where the client is most important, number one, but the service we give is professional, and the society in which we operate in, we should be leaving it in a better place than we found it in. If I can leave that legacy, then I’ll be comfortable that I’ve done my bit.